How to Find Your Ideal Customer with Target Market Analysis

Focusing your efforts on the right audience is essential for any ecommerce business. 

Most products are built to solve specific problems for specific people, and trying to appeal to everyone only dilutes your impact and wastes resources. 

A clear understanding of your target market — their needs, values, and preferences — ensures you invest in the right channels, offer the products they actually want, and craft messaging that resonates. 

That’s exactly what a thorough target market analysis enables you to do. 

In addition to learning what products and services to offer, a target market analysis helps you understand which advertising platforms to use, which is essential to allocate your advertising dollars better and convert customers through organic marketing efforts.

In the following sections, we’ll dive deeper into the purpose behind understanding which target markets your business should focus on, with step-by-step instructions to get you started conducting your own analysis.

What is a target market analysis?

A target market analysis is a structured process businesses use to identify and understand the specific group of customers most likely to buy their product or service. 

Rather than casting a wide net and hoping for the best, this approach segments the overall potential market into subsets based on shared traits — such as age, location, income, lifestyle, values, or purchasing behaviour — and picks out those segments most aligned with what the business offers.

The core goal of this analysis is to build a detailed profile (or persona) of your “ideal” customer, combining both quantitative data (demographics like age, gender, income, geographic location) and qualitative/psychographic data (shared characteristics, interests, values, attitudes, motivations). 

To group customers, this data can be organised into four main types of target market segmentation:

• Demographic (age, income, gender)

• Geographic (location, climate)

• Psychographic (lifestyle, values, personality)

• Behavioural (purchase habits, loyalty, usage) 

These categories help businesses understand who their customers are, where they are, why they buy, and how they act, allowing their teams to craft more effective marketing strategies.

With those insights in hand, you can design your products, marketing messaging, pricing, and advertising strategies to match the expectations and habits of that customer group. For example, you’ll know which channels to advertise on, what tone resonates with them, which product features to highlight, and how to position your brand to meet their needs.

Beyond marketing efficiency, target market analysis serves as a reality cheque: it helps you assess whether there’s a sufficiently large and viable audience for your product, whether demand is real, and whether your business idaea has a practical chance of success. It also reveals potential opportunities, which can include gaps in the market, underserved segments, segments where you can build brand loyalty, or unmet needs where your business might carve out a niche.

To put it simply, the point of a target market analysis is to:

• Identify the most and least valuable markets

• Develop buyer personas

• Find gaps in the market to fill

• Assess the viability of a product or service

• Improve business planning strategy

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Target market vs. target audience.

The term “target market” describes the broad group of consumers a business aims to serve. It’s defined by shared traits like age, income, location, lifestyle, or interests. By identifying your target market, you shape everything from the product’s design and pricing to where and how you’ll market it. 

In contrast, target audience is a more focused concept: it’s the specific group you aim to reach with a particular message, ad campaign, or piece of content. Your target audience typically sits within your target market, but represents a narrower slice of people you believe will respond best to the communication you’re about to put out. 

For example, a company’s target market might be “women aged 25 – 45 in urban areas,” while a particular ad’s target audience could be “millennial women aged 28 – 34 who enjoy yoga and wellness.” That kind of refinement helps your marketing hit with more resonance, rather than splash broadly and hope something sticks.

Understanding both — the broad “who you serve” (target market) and the narrow “who you speak to in this moment” (target audience) — is a strategic superpower. Use the former to define what your product is for, and the latter to craft how you talk about it.

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How to identify your target market

The first step to identifying your target market is determining your total addressable market (TAM), i.e., the maximum market size for your product or service.

One of the best ways to obtain a high-level overview of your customer base starts with gathering intel. You can do this by first consulting your company’s social media and learning from web analytics tools. These dashboards show where your customers live, their age, gender, general interests, and more. For more formal demographics information, the U.S. Census Bureau data allows you to dig deeper into communities around the United States, including states, counties, zip codes, and congressional districts.

Learning about your target market requires a combination of demographic and psychographic data. Your goal is to gather two types of data:

• Quantitative insights: Numbers, facts, and statistics about your specific market

• Qualitative insights: Voice of Customer (VoC) data, customer sentiment, preferences, purchase drivers, attitudes, and other psychographic traits

Use a mixture of primary and secondary data sources. Primary data constitutes intel gathered from your types of customers firsthand through surveys, interviews, or focus groups. Secondary data refers to data that has been collected by a third party, such as a government agency or market research firm.

Conduct your own primary research.

Rather than relying on pre-existing research, primary target market research entails obtaining first-hand data from current and potential customers to collect unique information suited to your business.

Primary research is more valuable because it answers a specific question rather than relying on second-hand data that was originally collected for another purpose. When interviewing customers, ask open-ended, in-depth questions that can help you cheque your assumptions and uncover more information beyond the scope of your initial research question.

• What problem does your customer want to solve? How do they currently solve their problem? What products or services do they use? What other options have they considered?

• What are their frustrations or pain points?

• How do they want to access your product or service? How do they want to be communicated to? Where do they go to make a buying decision?

• Who or what influences them to buy?

Set goals for the interview. What are the questions you really want to answer? This will help you develop questions and structure conversations to meet your purposes.

1. Surveys.

Social media polls can help you get quick answers to multiple-choice questions (e.g., do you prefer product A or B?). Also, encourage people to leave comments rather than just selecting one choice. Word your call-to-action in a way that inspires further conversation beyond the poll. Email or web surveys allow you to gather more in-depth data for further analysis after purchase, at events, etc.

2. Interviews.

Talk to customers in your niche market. Ask a mixture of general questions that help you dig deeper to understand the customer and product-specific questions to get details about user behaviour. Stick to a semi-structured interview format: questions are predetermined, but you have wiggle room to explore tangents based on how the conversation goes.

3. Focus groups.

Get feedback from a target group of consumers who fit your ideal customer profile. Focus groups can be done online or in person. This group of people should consist of current customers and potential customers. These interviews can help you get more meaning from facts and numbers obtained in more general surveys.

Ask open-ended questions that aren’t worded in a leading way. For example, rather than asking “Would you recommend product A to your friends?” ask “What did you like or dislike about product A?”

4. Learn from past transactions.

If your business has existing customers, you can also use consumer data on past transactions, or even gather intel during customer appreciation events where you asked attendees to provide feedback on product samples. This type of first-party qualitative data is invaluable for ecommerce businesses.

5. Reviews and testimonials.

On the topic of existing customers, don’t forget to mine for data about your target markets in existing reviews and testimonials. This can be through written feedback already provided on your website or through targeted surveys sent after purchase. 

6. Product trials.

Slightly more costly, but potentially giving more comprehensive results, businesses can invest in conducting product trials. This is a great way to gather primary data on how your product resonates with your potential target customers and get firsthand feedback from real people to take back to key decisionmakers (e.g., product developers, marketers, strategists) on your team. 

7. Research competitors.

When conducting target market analysis, ecommerce companies should study competitors to understand who they’re targeting, how they’re positioning themselves, and where gaps exist. Review competitors’ product offerings, pricing, customer reviews, and marketing channels to spot patterns in buyer needs and behaviours. From there, identify opportunities to differentiate,  whether through underserved customer segments, better messaging, or a stronger value proposition.

Where to find secondary data.

After digging deep to source primary data, supplement it with secondary data to give you a more complete picture and help you hone your target market strategy. 

The purpose of secondary data is to augment first-party data and to cheque your assumptions. Secondary data is also an important resource for effective ad targeting. Since secondary data has been aggregated by an external source, it may not accurately reflect your target audience, so make sure to cherry-pick only the most relevant insights.

The Big Four consulting firms that businesses rely on for secondary data research include McKinsey, Deloitte, Accenture, and EY, which regularly publish industry briefs and customer research reports.

You can also tap into consumer insights via Google Trends, U.S. Census Bureau, and more advertising-focused platforms such as Quantcast to build out a complete picture of your market.

Free (and paid) market analysis tools.

If you’re wondering how to get started conducting deeper target market analysis research on your own, there are a growing number of online tools that can help.

We’ve compiled a list of a few free (and paid) options to get you started:

How to use AI tools in target market analysis.

AI tools are most valuable in target market analysis when speed and scale matter. It’s especially effective in early research stages, when you're scanning the landscape for market trends, emerging needs, or shifts in consumer sentiment that humans might miss on a first pass.

AI also shines when you need sharper segmentation or deeper insight into what customers actually mean, not just what they say. Modern language models can pull themes from messy, unstructured feedback and help you tailor messaging with surprising precision. 

Of course, AI isn’t a full replacement for human judgement, but when used alongside traditional research, it becomes the ultimate strategic sidekick: fast, tireless, and very good at connecting dots.

Step-by-step guide to using AI for target market analysis:

1. Define your research goals: Start by clarifying what you need to learn. Are you exploring market size, spotting trends, evaluating competitors, or understanding customer sentiment? 

2. Gather and aggregate data with AI: Use AI to collect and organisue both internal and external data. For internal data, that could mean past customer feedback, reviews, or sales records; for external data, AI can harvest social-media chatter, competitor information, SEO keyword trends, and more. 

3. Use AI-powered sentiment analysis and consumer behavior analysis: Leverage natural-language processing tools to scan reviews, comments, survey responses, and even recorded interviews or calls. This can reveal what customers genuinely feel, including their pain points, desires, likes/dislikes.

4. Segment and tailor your marketing strategy: With data and sentiment insights in hand, apply AI to refine your target customer segments (buyer personas), forecast demand, and tailor messaging. Use automated surveys, A/B testing tools, or predictive-analytics platforms to test which offers, features, or marketing campaigns best resonate with different audience segments.

5. Save time and resources — use AI as a force multiplier: AI tools can speed up research cycles dramatically. What used to take days or weeks — manually combing through reviews, competitor sites, or customer feedback — can now be done in minutes. This efficiency lets you run regular market scans or pivot quickly when new trends emerge, without ballooning your costs or headcount.

6. Depending on your budget and objectives, begin with broadly useful tools. For example:

   • A conversational AI or large-language-model-based tool (like ChatGPT) — useful for analysing feedback, building buyer personas, or summarising insights. 

   • A sentiment analysis tool (like Insight7) — helpful for analysing customer reviews, interviews, or support transcripts at scale.

   • A competitive-intelligence or market-research platform (like Crayon or Semrush Market Explorer) can help when you want to benchmark competitors or quantify market size.

7. Combine AI insights with human judgement: AI can surface patterns, highlight trends, and summarise sentiment, but you still need human oversight to interpret context, validate findings, and decide strategic actions. Treat AI output as a powerful assistant, not a final verdict.

Train AI to help with target market analysis.

Using artificial intelligence tools can help you learn more about your target market while using fewer resources, but it does take a little training to enable it to provide you with the best results. 

To learn how to train AI on how to get to know your ecommerce business, start with the following steps: 

1. Give AI deep context about your business. 

AI becomes far more accurate when it understands your brand ecosystem. This acts like onboarding a new analyst — AI learns the language, priorities, and patterns your business cares about.

Provide AI tools with:

• Product descriptions and catalogues

• Customer personas

• Past research reports

• Competitor profiles

• Customer reviews and FAQs

2. Upload customer feedback for pattern detection. 

This teaches AI how your audience behaves and how to segment them more accurately.

Train AI by feeding it large samples of:

• Reviews (your own and competitor reviews)

• Support tickets

• Survey responses

• Social media comments

Then ask it to classify themes like:

• Pain points

• Purchase motivations

• Objections

• Emotional triggers

3. Build custom prompt templates.

You can train AI behaviour through repeatable prompt formats.

Examples include:

Market landscape scan:

“Analyse this product category. Summarise customer segments, emerging needs, competitor positioning, and opportunities.”

Sentiment analysis guide:

“Extract themes from these reviews and categorise them as positive, negative, or unmet needs. Include sample quotes.”

Competitive analysis template:

“Compare Competitor A and B across features, pricing, positioning, and messaging. Identify gaps.”

4. Use Retrieval-Augmented Generation (RAG).

Store your data (reports, transcripts, market insights) in a searchable library and allow AI to reference it. RAG effectively trains AI to operate like an internal market-research database.

This lets AI:

• Pull accurate information

• Compare trends over time

• Generate insights tied to real-world data

5. Provide “labelled examples” to train consistent analysis.

This is how you show AI how you classify information.

For example:

“When customers mention shipping delays or damaged items, classify under ‘Logistical Pain Points.’ When they mention price, classify under ‘Value Sensitivity.’”

6. Fine tune AI on your tone of voice (TOV) and thinking style.

This allows businesses to create AI models that think and communicate like your business does.

You can fine tune a model on:

• Past reports

• Customer segmentation frameworks

• Your brand voice

• Successful marketing messages

7. Teach AI to use external signals.

AI learns to include broader industry insight, not just internal data.

Have AI regularly analyse:

• Google search trends

• Social media patterns

• Competitor website updates

• Industry news

• Amazon or marketplace reviews

You can even add a standing instruction like:

“In every market analysis, include a section on trends and competitive signals.”

8. Create an internal “AI Market Research Playbook.”

This ensures the AI tool produces research that feels consistent, accurate, and decision-ready.

Documents to include in your playbook:

• Standard prompts

• Data sources

• Definitions of customer segments

• Analysis formats (SWOT, sentiment map, persona update)

• A review workflow

Create customer profiles and market segments.

Now that you’ve done the research, it’s time to build out a customer profile using all of the primary and secondary data you’ve collected and vetted. 

A customer profile is a summarised view of your ideal customer — their pain points, interests, buying patterns, and demographic information.

Demographic data signals the most effective marketing channels for your business (each social media platform has slightly different audience demographics), where to sell your products and how to price them and the ideal language to use to address your customer.

Below are some key demographic data points:

• Age

• Location

• Gender

• Income

• Education level

• Relationship status

• Occupation

Psychographic data reveals the types of products your customers value and the types of brands they want to associate with. For example, someone who travels frequently and follows a vegetarian diet because they care deeply about the humane treatment of animals might appreciate plant-based snacks that are easy to take on the go and marketed as cruelty-free.

Here is the type of psychographic data you should aim to collect:

• Interests

• Hobbies

• Values

• Attitudes

• Behaviours

• Lifestyle preferences

Competitive analysis.

Identify your top competitors, research their marketing and sales strategies and assess your brand’s relative strengths and weaknesses. Analying your competitors can help you spot industry trends and set benchmarks for future growth potential.

This information can help inform your positioning in the market, determine which products and services to offer, and what target audience to focus on.

For example, say you sell handmade cosmetics. Your biggest competitor already corners an 80% market share — but their main audience is women in their mid-twenties. You might consider targeting teenagers or older women instead.

Finally, understanding your weaknesses relative to competitors can help you offer a better customer experience.

Look at your business in a fresh light.

Take the feedback you receive and use it to gain a new perspective on your business. Be willing to face the hard truth. If nobody liked your prototype, there’s no sense in launching the product.

You’ll have a massive amount of data — notes, audio/video recordings, and personal impressions.

Most of this data will be qualitative rather than quantitative. How should you analyse it? Go back to the goals you set before you conducted the interviews. Sort your data according to the major questions. Consider your overall business strategy and the metrics you hope to hit.

If you can, format this information in a template so you can replicate it moving forward:

• Do you have enough potential customers to start a new business? Is there sufficient demand for your product?

• Will your target market benefit from your product or service?

• Can your target market afford your product or service? If so, how frequently can they buy?

• Can you reach your market with your message? How accessible are they?

Answering these questions will help you better understand if you are ready to sell online or if you need to pivot your marketing focus (or even your products) to appeal to a different audience.

The final word

Before starting a business, get to know your industry, competitors, and customers on a deeper level. 

By conducting a thorough target market analysis you can go to market with confidence that there is a sufficiently large addressable market for your product and that the product or service you are offering meets their needs. 

Gathering intel via primary and secondary sources, analysing it, and putting it to use also enables you to hone your marketing messaging, speaking to the right target audiences in a way that aligns with their values. Understanding your target market helps you determine which social media platforms and online marketplaces to concentrate your efforts on, as well.

At the end of the day, there are more resources than ever to help ecommerce stores set themselves up for success. 

It all starts with opening your mind with the data.

FAQs about target market analysis